(DENVER) — On Thursday, Colorado Attorney General (AG) Phil Weiser urged a Washington State court judge to block Albertsons’ $4 billion payout to its investors while the company’s merger with Kroger is under federal and state regulatory review.

Weiser, whose office is leading a multistate investigation of the proposed Kroger/Albertsons merger, has expressed deep concerns that if the merger is approved, it could result in higher prices for Colorado consumers, lower wages for workers, fewer jobs, and would negatively impact farmers and other local suppliers.

Albertsons’ planned special dividend will deplete the company’s cash reserves, saddle the company with more debt, and affect any potential remedies or enforcement actions from the regulatory review of the merger, according to a brief filed with the King County Superior Court in Washington.

“If the special dividend is allowed to be paid out to investors, it would lessen Albertsons’ ability to compete not only during the pendency of the merger review, but also in the event that the merger is blocked and Albertsons has to continue on its own,” Weiser said. “The special dividend also risks devaluing any stores that would be part of a potential divestiture by limiting Albertsons’ ability to make capital improvements to those stores, provide routine maintenance, or even ensure proper inventory. That, in turn, could poison the well for any potential divestiture remedy.”

As the court weighs whether to permit the special dividend, Weiser said it should consider the failed divestiture that was part of Albertsons’ merger with Safeway in 2015. Back then, the Federal Trade Commission required Albertsons to sell off 168 of its stores as part of that merger approval.

Haggen, a regional grocer, purchased 146 of the stores. Several months later, Haggen went bankrupt after it was stripped of cash due to the payment of a $20 million dividend to its private equity shareholder and accelerating a $25 million loan repayment to that same shareholder. In the end, Albertsons reacquired many of the divested stores at a discount and bought the Haggen brand name, while other stores closed permanently. 

“The court should view Albertsons’ proposed special dividend with great skepticism given the company’s past conduct. The Haggen divestiture story provides a cautionary tale for this proposed merger—stripped of capital through a dividend and accelerated debt repayment to its private equity shareholder, overburdened with debt, and having bought stores that were poorly positioned to compete, Haggen was dead in the water, and so was the FTC’s divestiture remedy. The court should act to prevent a similar fate here,” Weiser explained.

Oral argument on the motion to temporarily block the dividend is scheduled for Friday, Dec. 9 in King County Superior Court.

Weiser also announced that in the new year, he will hold public community forums across the state to listen to Coloradans’ feedback and concerns about the merger.